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New consumer protection laws could hike used car pricesBack

iVendiNew consumer protection legislation may lead to customers paying higher prices for used cars.

iVendi, the automotive e-commerce company, warns that FCA regulations may squeeze margins available from finance and insurance product sales while the Consumer Rights Bill, currently making its way through Parliament, could mean that all dealers start to prepare used cars to a higher standard.

“If the FCA measures are successful in increasing competition when it comes to products such as motor finance and GAP insurance, and profits are reduced, then dealers may simply have to move the margin elsewhere,” said director James Tew.

“It is a long-established marketing approach among some dealers to price cars at the bottom end of the market and then rely on selling finance and insurance products to the customer in order to make a workable profit. This may no longer be possible.

He also warned that measures in the Consumer Rights Bill may force some independent dealers to prepare cars to the same retail quality of franchised sites offered vehicles on manufacturer approved schemes.

“Traditionally, the used car market provides a choice that is almost unacknowledged but true, that for seemingly identical cars, there are a wide variety of options in terms of pricing and condition.

“For example, at one extreme, you may have a manufacturer approved car from a franchise dealer that is in a condition and has a support package similar to a new car. At the other, you may have a local, independent dealer that sells a similar car with a much lower degree of preparation and offers no more protection than a three month warranty. The difference in price between these choices can easily be 20%.

“If it is effective, the Consumer Rights Bill may ultimately take away this choice. All vehicles will have to be prepared to a relatively high standard and will be priced accordingly, with the market differential much reduced.”

Tew said the combined impact of these new moves to protect consumers may be to create a “flatter used car market with a more uniform proposition but one where the vehicles themselves carry more expensive windscreen prices”.

Posted by Sue Robinson on 05/09/2014